How to prepare your business for Venture Capital

You have identified a pain-point in the world, you have an idea to resolve that pain-point, and you have worked out a business proposition for it. You know how the business will grow, where the revenue will come from, who your customers will be. You have markets and their sizes in mind, as well as competitors and obstacles. Now, how do you take all that to a VC?

While there are a large number of VC investors out there looking to put their money to work, actually obtaining funding can be difficult. Whether you utilize a broker or not, having a very clearly defined business model will be helpful. This article written by Richard Harroch entitled “65 Questions Venture Capitalists Will Ask Startups” provides a nice frame for the information that you will need to consider.

Every entrepreneur believes his startup is a winner, and that his business idea is brilliant. But that’s hardly enough. Other people have to see evidence of it to back the idea. Especially VCs. Your pedigree, academic credentials, and even the idea “might” get you a meeting with potential investors, but sometimes that is still not enough.

You can run a small, profitable business comfortably, but that doesn’t interest a VC. You should go to a VC only if you have ambitions to scale up your business with big infusions of capital. You should also be prepared to get onto a fast growth track, because your venture capital investors will want to sell their stake and reinvest in new startups.

With so many startups clamoring for venture capital funding, it’s the ones that get VCs to respond emotionally, and not just analytically, that are more likely to make the cut. It may come down to how well a VC connects with the founder or team, or whether they can relate to the problems the startup is trying to solve. The investors who eventually end up cutting the check are those who become equally passionate about solving the defined problems. They see that spark in the entrepreneur. They see that market opportunity, with as much passion and faith as the entrepreneur sees it.

Having a well thought out business plan, that answers all the questions that a VC will want to know and and clearly expresses its pain point solution with passion is imperative.